Lebanon’s economic crisis has spared few. Among the collapse’s cruelest blows has been the wholesale destruction of retirement savings, many of which were held in pension schemes run by Lebanon’s various professional syndicates.
Throughout their careers, many Lebanese workers relied on their syndicate pension fund to provide a vital nest-egg for retirement due to the absence of a national pension system. Unlike younger generations, elderly Lebanese cannot even count on the thin hope of rebuilding savings that the nation’s bankers have squandered, having reached the end of their working lives. And, in a country with scant social protection networks, Lebanon’s retirees face especially bleak prospects.
While the financial sector bears overwhelming responsibility for this calamity, syndicate leaders have been caught fast asleep at the wheel. The recent policy paper we co-authored with Guy Saad for Triangle explained how syndicate retirement plans have made decades’ worth of poor decisions, exposing their members’ life savings to unacceptable levels of risk.
First, almost all Lebanese pension plans promised unrealistic benefits to syndicate members. According to best practice, retirement funds should design pension schemes in close consultation with professional actuaries, who calibrate the balance between the amount of members’ contributions and the fund’s liabilities when members retire. On average, OECD countries require that fund members contribute 19 percent of their annual earnings and receive 50 percent of their former salary during retirement.
Most Lebanese syndicate funds have not run such calculations. Instead, syndicate members contribute nominal amounts throughout their working lives. Then, upon retirement, members stand to receive retirement benefits 13 times greater than the fund’s annual revenue on a per individual basis. Even to the untrained eye, these numbers simply do not stack up, making the entire fund financially unsustainable.
Second, Lebanese pension funds have consistently departed from international guidelines for sound investment. In OECD countries, retirement funds invest up to 70 percent of their assets in equities, bills, and bonds — and place just 7 percent in cash deposits. Moreover, the average OECD pension scheme places 35 percent of members’ savings abroad and invests around 24 percent in foreign currencies. Such a diversified investment strategy spreads risk across the fund’s portfolio, increasing the fund’s resistance to financial shocks.
By contrast, Lebanese syndicates placed their members’ savings almost entirely with local banks in cash deposits — often denominated in now massively devalued Lebanese lira. Just as scheme designs often lacked actuarial oversight, most syndicates did not have financial professionals guiding their investment decisions. Instead, they were simply attracted to the very high interest rates offered by Lebanese banks. When those same financial institutions proved unable to cover their liabilities, billions of dollars in retirement savings were swallowed into the morass.
Lebanese syndicate leaders have not always failed their members so glaringly. Indeed, until the end of the civil war, syndicates and unions were major advocates for workers’ rights. The General Confederation of Lebanese Workers (GCLW), an umbrella organisation for the country’s various trade unions, successfully negotiated with the government to increase annual wages amid inflation during the civil war. In the late 1980s, the GCLW organised several general strikes calling for an end to hostilities, which bridged sectarian divides.
A united labour movement terrified Lebanon’s ruling class which — in the intervening years — went to great lengths to divide the nation’s workers and undermine professional syndicates and labour unions. These tactics have included creating new labour federations loyal to political elites and directly interfering in the GCLW’s elections. When protests broke out during the October 2019 thawra movement, syndicates were generally absent — signifying their inability, or unwillingness, to mobilise against Lebanon’s elites.
More than ever, syndicate members need leaders to boldly defend their pension entitlements. At first, these efforts will revolve around upcoming negotiations for an IMF bailout package, which will inevitably allocate the losses of Lebanon’s financial sector. Syndicates must participate in these talks and ensure that banking elites do not use members’ retirement savings to pay off their astronomical debts.
Looking further ahead, syndicate leaders must be willing to institute tough, necessary reforms to Lebanon’s pension funds. All syndicates need to engage professional actuaries to design more sustainable pension schemes, while asset management specialists should institute more prudent investment policies. These changes will not always be popular — after all, most pension plans will need to start offering less generous retirement benefits — but they are simply unavoidable.
After decades of political co-optation and mismanagement, syndicate members cannot rely on their leaders for these crucial tasks. Instead, they should form a united front to circumvent Lebanon’s banks and communicate directly with the IMF. With this platform, syndicates should demand that financial losses are assigned to those who caused the crisis — not those who are affected by it.
Shaya Laughlin and David Wood are researchers at Beirut-based think tank Triangle.
Lebanon’s economic crisis has spared few. Among the collapse’s cruelest blows has been the wholesale destruction of retirement savings, many of which were held in pension schemes run by Lebanon’s various professional syndicates. Throughout their careers, many Lebanese workers relied on their syndicate pension fund to provide a vital nest-egg for retirement due to the absence of a national...